The Irish Small and Medium Enterprises Association (ISME) has reported a turnaround in job creation in the sector this year.
In an end-of-year statement, the association said a net 15% of companies had increased their workforce in the past 12 months.
ISME said this was a significant improvement on 2003, when a net 3% of companies shed jobs.
The association said the indications were that 2005 will see a further boost in employment in the small and medium enterprises sector, with a predicted increase of 25,000 jobs.
It also said 51% of small firms had increased investments by the end of 2004 and this trend was set to continue in 2005, albeit at a slower pace.
Despite this positive outlook, ISME said action was needed to tackle growing business costs and declining competitiveness.